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Qualcomm Beats on Q1 Earnings, Lags Revs

Qualcomm Inc. (QCOM - Free Report) reported mixed financial results for the first quarter of fiscal 2014. While net income surpassed the Zacks Consensus Estimate, total revenue fell below the same. However, management raised its financial outlook for fiscal 2014. As a result, in the aftermarket trade on Nasdaq, the stock price of the company was up by $2.23 (3.14%) to $73.35.

Net Income

On a GAAP basis, quarterly net income from continuing operations was $1,444 million or 84 cents per share compared with $1,903 million or $1.09 per share in the year-ago quarter. However, adjusted (excluding special items) earnings per share came in at $1.13, easily beating the Zacks Consensus Estimate of $1.10.

Revenue

Quarterly total revenue of $6,622 million was up 10% year over year, but fell below the Zacks Consensus Estimate of $6,700 million. Segment wise, Qualcomm CDMA Technologies businesses contributed $4,616 million of revenues in the first quarter, up 12% over the prior-year quarter. Quarterly EBT margin was 20%. Qualcomm Technology Licensing generated $1,900 million in revenues, up 8% year over year. Quarterly EBT margin was 88%.

Chipset Statistics

During the first quarter of fiscal 2014, Qualcomm shipped approximately 213 million CDMA-based MSM chipsets, up 17% year over year. This figure was far better than the company’s guidance of a mid-point of 202.5 million. Average selling price (ASP) of a mobile handset with an in-built Qualcomm chipset during this quarter was around $219–$225.

Operating Metrics

Quarterly operating income was $1,493 million compared with $2,088 million in the year-ago quarter. Gross margin was 59.1% compared with 65.3% in the year-ago quarter. Quarterly operating margin was 21.8% compared with 31.6% in the prior-year quarter. In the reported quarter, the company returned $590 million (35 cents per share) to its shareholders in the form of cash dividends and another $1 billion through buyback of 14.2 million shares of common stock.

Cash Flow

During the first quarter of fiscal 2014, Qualcomm generated $2,781 million of cash from operations compared with $1,975 million in the prior-year quarter. Free cash flow, in the reported quarter, was $2,571 million against $1,770 million in the year-ago quarter.

Liquidity

At the end of the first quarter of fiscal 2014, Qualcomm had $31,610 million of cash and marketable securities and no outstanding debt on its balance sheet compared with $29,406 million of cash and marketable securities and no outstanding debt at the end of fiscal 2013.

Second Quarter of Fiscal 2014 Financial Guidance

The first-quarter revenues are expected in the range of $6.1–$6.7 billion. GAAP earnings per share are projected to be 99 cent –$1.09. Non-GAAP earnings per share are likely to range between $1.03–$1.13 including 13 cents per share of stock-based compensation expense. Qualcomm is expected to ship 180–195 million MSM chipsets in the second quarter of fiscal 2014.

Fiscal 2014 Financial Guidance

The fiscal 2014 revenues are expected in the $26–$27.5 billion range. GAAP earnings per share are likely to be between $4.33 and $4.53. Non-GAAP earnings per share are expected in the band of $4.49–$4.69 including 51 cents per share of stock-based compensation expense. ASP of mobile handset with an in-built Qualcomm chipset during fiscal 2014 is projected around $216–$230.

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